I use this blog to gather information and thoughts about invention and innovation, the subjects I've been teaching at Stanford University Continuing Studies Program since 2005.
The current course is Principles of Invention and Innovation (Summer '17).
Our book "Scalable Innovation" is now available on Amazon http://www.amazon.com/Scalable-Innovation-Inventors-Entrepreneurs-Professionals/dp/1466590971/

Friday, July 13, 2012

(BN) Sun Valley Media Moguls Gain Footing With Emerging Models

July 12 (Bloomberg) -- Media moguls gathered at the annual Allen & Co. conference have spent recent years contemplating how to cope with technology companies drawing audiences away from television and movies.

This time, film and TV executives like Walt Disney Co.'s Jay Rasulo know just where their businesses are headed.

Once threatened by Internet players such as Netflix Inc., traditional entertainment companies now view online outlets as a rich new vein for viewers who'll pay $8 a month for mostly older films and TV shows. Fresher programs, such as NBC Universal's webcast of Olympic events, are reserved for cable and satellite subscribers who already pay much more.

"We in the media business all have to be everywhere," Rasulo, Disney's chief financial officer, said in an interview yesterday at the conference.

The strategies of established media companies tackling online video have evolved over the past two years, according to Blake Krikorian, a conference attendee and director of Amazon.com Inc., one of the emerging players in film and TV services on the Internet.

Initially, media companies such as New York-based Time Warner Inc. and Disney put shows up for free on websites such as Hulu.com. Then they awoke to the decline of the newspaper industry.

"It may be too late" for some companies, Liberty Media Corp. Chairman John Malone told reporters three years ago at the retreat in Sun Valley, Idaho. "The Internet is moving too fast, too far."

Best Stuff

Today, media companies are requiring usernames and passwords, making sure everyone pays for movies and TV shows, and reserving their newest and best material for the highest- paying customers. Even newspapers are starting to charge for more than limited access to their websites.

"There's been this big push to get video content behind paywalls with authentication," Krikorian said. "Now that there is this foundation in place you're starting to see some interesting things come out."

Disney, he said, has introduced applications that let cable subscribers watch live shows on an Apple Inc. iPhone or iPad. The Burbank, California-based company's Watch Disney application was the ninth most downloaded free iPad application last week, according to the industry researcher AppAnnie.

Comcast Accord

Rasulo cited a 10-year programming agreement Disney reached this year with Comcast Corp., the largest U.S. pay-TV provider, as one that underscores the industry's emerging consensus. The accord is worth $22 billion to $25 billion, a person with knowledge of the deal said at the time.

While Disney isn't getting revenue from the Watch app, Rasulo said the arrangement reached in January included 70 other services that extend Comcast subscribers' access to Disney, ABC and ESPN programs.

The agreement also ensured Comcast viewers wouldn't lose Disney programming to fee disputes, such as the battle between satellite TV provider DirecTV and Viacom Inc., which has cut off subscriber access to networks including MTV and Nickelodeon.

Shares of the traditional cable and entertainment companies suggest the new-found confidence is extending to investors as well.

Comcast, owner of NBC Universal, as well as cable systems, has gained 34 percent this year, leading the 16-company S&P 500 Media Index. Time Warner Cable Inc. is second, ahead 30 percent, and Disney is third with a gain of 26 percent. The Dow Jones Industrial Average is up 3.2 percent this year.

Tech Falters

At the same time, newer Internet companies have faltered, with Facebook Inc. down 19 percent from its May initial share sale and Zynga Inc., the online game provider, down 47 percent this year. Google Inc., owner of YouTube and the world's most popular search engine, has declined 12 percent in 2012.

The online drive by established media companies still poses risks to their businesses, according to Robert Johnson, a founder of the BET cable network and the first black U.S. billionaire.

Johnson told reporters at Sun Valley that watching shows online will lead consumers to question how much they pay for cable TV service, which cost an average of $80 a month last year, according to data compiled by Bloomberg. The result may be more pressure to sell channels individually and let viewers drop networks they don't like, so-called a la carte TV.

"Digital will make it more pronounced if you want to buy one, two or three of something," Johnson said in an interview. "If that's all you want to watch, that's all you're going to pay for."

Channel Choices

In an interview at Sun Valley, Michael White, chief executive officer of DirecTV, said his company, the largest U.S. satellite service, isn't looking to break up Viacom's bundle of channels, even though his customers would prefer not to pay for networks they don't watch.

Still, the sluggish economy and online services such as Los Gatos, California-based Netflix may make satellite TV customers less willing to pay higher rates, White said.

Jeffrey Bewkes, Time Warner Inc.'s CEO, emerged from the Duchin Lounge, the bar at the Sun Valley Lodge, after a "very long discussion" on the first night of the conference with Reed Hastings, the CEO of Netflix, a company he once belittled by comparing it to the Albanian army.

In January, Netflix agreed to delay renting Time Warner DVDs by mail to give its Warner Bros. studio more time to sell new releases.

Bewkes said he also expects to talk with Apple CEO Tim Cook about the planned AppleTV product. To get television programming, Apple would have to be willing to pay as much in affiliate fees as cable companies, he said.

Krikorian, Amazon.com's board member, sees content owners and distributors emerging from such talks with a clearer idea of where they are headed. While there are challenges, distributors and content owners know each other better, he said.

"The industry is coming out of this hibernation period of the last couple of years," said Krikorian, who helped create Slingbox, one of the earliest efforts to integrate the Internet and TV. "More of the content owners and networks are looking to play offense."